case law

id : 20237

id: 20237

Polish Supreme Court judgment

dated 11 May 2007

Case No. I CSK 82/07

Summary by arbitraz.laszczuk.pl:

In April 2000, E. SA, as tenant, and the legal predecessor of T.R. Sp. z o.o., as landlord, entered into a lease for a building, for 5 years with an option to extend. There was a clause calling for arbitration before the Court of Arbitration at the Polish Chamber of Commerce. In May 2001, the lease was amended to extend the lease term to 10 years. In January 2005, E. SA gave notice of its intention not to renew the lease for a further 5 years (beyond the original 5-year term).

The landlord commenced a proceeding before the arbitration court seeking a declaration that the lease continued in force until 2010, and seeking back rent. The tenant moved to stay the arbitration until a criminal case was resolved in which the tenant claimed that there was criminal activity involved in the signing of the alleged extension of the lease term (i.e. the annex was forged or back-dated) and there was no corporate authority to sign the extension. The arbitration court refused to stay the proceeding or admit evidence of lack of authority to extend the lease, and issued an award for the landlord.

The tenant filed a petition with the regional court to set aside the award, alleging that it was denied a defence in the arbitration. The court denied the petition, finding that the allegations went to the merits of the arbitration court’s findings and did not rise to the level of violations of public policy which could be reviewed by the court.

The appellate court affirmed on the same grounds, further finding that the arbitration award could not be found to be procured through a crime merely because the claimant relied on an allegedly back-dated document. In order to justify setting aside the award, the criminality would have to involve criminality in the proceeding itself, a “judicial offence” such as perjury, not alleged criminality affecting an underlying document.

The Supreme Court denied the cassation appeal on similar grounds, finding that the decisions by the arbitration court were based on its interpretation of the relevant law, and thus the tenant had not been denied the right to present a defence in the arbitration proceeding.

Excerpts from the text of the court’s ruling:

1. When assessing whether a party was truly deprived of the opportunity to defend its rights in a proceeding before an arbitration court, the course of the arbitration proceeding should be considered scrupulously, also bearing in mind that the court is not authorized to review the decision made on the merits and that in making an arbitration agreement the parties consciously waived submission to the strictures in place for a proceeding before a [state] court.

2. A party is deprived of the opportunity to defend its rights before the arbitration court when the principle of equality of the parties is violated, and one of the parties is not heard and does not have the opportunity to address the evidence and allegations presented by the opposing party. For these reasons, every instance in which the arbitration court refuses to admit evidence sought by a party cannot be equated with depriving the party of a defence, because this happens only when the party has no opportunity to present and argue for its position.

3. Substantive review of an arbitration award by the court is limited to an assessment of whether the award that was issued violates principles of the legal order. The term used in the law, “fundamental principles of the legal order” (Civil Procedure Code Art. 1206 §2(2)) clearly indicates that this refers to such violations of substantive regulations that would result in violation of the principles of the rule of law, and the award violates the leading legal principles in force in the Republic of Poland and conflicts with the legal order in force, that is, violates the principles of the political and socio-economic system.

4. When deciding to submit a dispute for resolution by an arbitration court, the parties must be aware of both the positive and the negative effects of entering into the relevant clause in an agreement: on one hand they avoid a long-lasting proceeding, but on the other hand they waive certain procedural guarantees in force in a judicial proceeding.

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